Minnesota: BCBS paying back $30M in excess profits this year THANKS SPECIFICALLY TO THE ACA

Positive Blue Cross results trigger rebates to consumers
It is legally required to return about $30 million of its 2017 profit to subscribers.

After three years of losses in the state’s market where individuals buy health insurance, Blue Cross and Blue Shield of Minnesota made so much money last year that it has to give some back.

The Eagan-based carrier, which is the state’s largest nonprofit health plan, disclosed last week that it expects to provide $30 million in consumer rebates as required by rules in the federal Affordable Care Act (ACA).

Analysts said that Blue Cross likely isn’t alone in having overshot with rates last year, since insurers across the country have been struggling to figure out how much premium revenue they need to cover the cost of medical bills in the individual market.

In Minnesota, rebates driven by big margins are a surprising cap to a year that started with fears that mounting losses would cause a market collapse.

“Remember in 2016, they approved premium rate increases between 50 percent and 67 percent for 2017,” said Roger Feldman, an emeritus professor of health economics at the University of Minnesota, noting the range of increases for Blue Cross and its competitors. “That just knocks your socks off.”

...Blue Cross lost more individual-market enrollees last year than the carrier anticipated, Stich said, noting the number plunged from about 100,000 to roughly 37,000. Use of medical services among enrollees was lower than expected, Stich said.

On a per-person basis, in fact, medical spending in the individual market declined significantly during 2017, according to a report last week from the Minnesota Council of Health Plans, a trade group for insurers. The group’s executive director called the decline surprising and unexpected.

In other words, they dropped their PPOs and have only offered HMOs since 2016.

...The individual market has been shrinking in Minnesota following ACA reforms that kicked in for 2014. Enrollment in the market was 151,364 at the end of last year, down from nearly 300,000 a few years ago, according to the Minnesota Council of Health Plans.

Sidenote (for my own purposes): When you subtract the 116K who enrolled in ACA exchange policies for 2018, that leaves around 35,000 people enrolled in Minnesota's off-exchange ACA-compliant market.

...Part of the improvement came from the individual market, where carriers saw $157 million in profit — a sum the trade group described as a “gain” that represented a 16 percent margin on $976 million in revenue. That’s an unusually high profit figure, and shows how insurers were still having trouble in 2017 figuring out where to set premium prices, said Deep Banerjee, an analyst with S&P Global Ratings.

...Refunds are mandated by the Affordable Care Act, which regulates the share of premium revenue that health insurers must spend on clinical services and quality improvement. The rule, which is similar to an older Minnesota statute, requires insurers to issue rebates to individual market enrollees if the share of premiums spent on health care falls below 80 percent.

...The ACA rule has been prompting rebates since 2011, but there have been relatively few in Minnesota. Over a six-year period, the federal government tabulated $1.1 billion in rebates from insurers in the individual market across the country, but only about $1.5 million in payments to Minnesota consumers.

In other words, BCBS of Minnesota's 2017 windfall alone is 20x as much as that of all Minnesota carriers combined from 2011 - 2016.

Rebates won’t be finalized until the summer, and won’t be paid to consumers until the fall. It’s unclear exactly how much consumers might expect per person.

More than 37,000 people were buying its individual market plans last year, which might imply a payout of roughly $800 each considering the estimated $30 million total. But McManus said actual rebates will depend upon a number of factors including how long a person was enrolled during 2017 and the amount of premium paid.

Yes, that's right: 37,000 Minnesotans will be receiving an average rebate check of $800 apiece just ahead of the midterm election...and every damned dime of it is specifically thanks to the Affordable Care Act's 80/20 Medical Loss Ratio rule.

Just saying.

UPDATE: I should note that BCBS's actual "excess" profit on the individual market in 2017 was probably quite a bit higher than $30 million, but it was presumably mostly cancelled out by losses in 2015 and 2016 (remember, the ACA's medical loss ratio rule is based on a 3-year rolling average).